or failure to act, so ratified and adopted the work in progress as to make it responsible therefor; and (6) in finding that the tug Ida M. Chase came to the wharf and her master told Capt. Gurney that he desired to remove a rope from the tug's propeller.

The evidence discloses that, prior to the filing of the petition, Collins had brought a suit in the superior court of Massachusetts against the Lighter Company to recover damages for an injury sustained while at work under the stern of the tug, Ida M. Chase, endeavoring to remove a rope from her propeller (her stern at the time being raised in the air by the company's lighter to permit the work to be done) and had recovered a verdict for $10,000; that the case was transferred to the Supreme Judicial Court, on exceptions to the refusal of the court below to direct a verdict for the defendant; and that the exceptions were overruled and the case certified back to the superior court for judgment. 230 Mass. 281, 120 N. E. 66. In the Supreme Judicial Court it was held that the evidence warranted the jury in finding: (1) That Collins was not a volunteer or a trespasser, and was of right in the place where he was at the time he suffered the injury of which he complained; (2) that the defendant had undertaken the work of raising the tug, and the acts of its servants and agents were authorized; and (3) that the defendant was negligent, in that it could be found that the hook on the fall of the derrick holding the sling passed around the stern of the tug was "so worn, chafed, and frayed" that when subjected to the necessary strain it gave way, and that this condition could have been ascertained and remedied by the exercise of reasonable diligence on the part of the defendant's agents and serv

ants.

It is conceded that the liability of the appellant for the injury suffered by the claimant is concluded by the judgment of the state court. • This concession disposes of the questions raised by the first two assignments of error so far as they relate to the question of liability. It is also conceded that the lighter is a vessel, within the meaning of sections 4283-4288 (Comp. St. §§ 8021-8026), and section 4289, as amended by Act June 19, 1886, c. 421, § 4, 24 Stat. 80 (Comp. St. § 8027); that its value is less than the damages suffered by the claimant; and that the privity or knowledge of Capt. Gurney, who was the vice president, director, and general manager of the Lighter Company, was the privity or knowledge of the company.

The finding complained of in the sixth assignment of error is immaterial, as the judgment of the state court determined that the Lighter Company had undertaken the work of raising the tug and that its servants and agents were acting within their authority in undertaking to raise her as they did. The fourth and fifth assignments, if they pertain to any question apart from those concluded by the judgment in the state court, relate merely to subsidiary matters stated by the District Judge in a course of reasoning by which he reached the conclusion that the injury inflicted upon Collins was not without the privity or knowledge of Capt. Gurney, who in this case is the Lighter Company, and in this respect they do not differ from the third assignment of error. Such being the case, the question is whether the evidence

produced at the trial is such that it should be found that the injury inflicted upon Collins by the Lighter Company was without the privity or knowledge of Gurney.

As to this matter Capt. Gurney testified that shortly before the accident occurred he looked out of a window in the entry leading from the office of the Lighter Company and saw the tug stern up in the air from Lighter No. 2; that he went directly out and found that the engineer of the tug was on the hub of its propeller, and that the claimant, Collins, was in a boat underneath the arch of the tug; that he (Gurney) was there about 15 minutes before the accident happened; that the lighter was not suitable to hoist the tug; that her tackle, engine, and boom were all too light to do the work; that the ends of the straps secured about the stern of the tug were improperly fastened to the hook on the derrick, and brought an unusual strain on the point of the hook; that he saw this the instant he got down there; that as general manager of the company he had control and direction of the lighter, with authority to order the work to stop, and that he stood there and watched the work go on for 15 minutes, and saw the accident happen which he anticipated would occur at the time he looked out of the window; that the two men were then underneath the tug and about 35 feet from him; that, although he knew they were in a dangerous position, he did not tell them to get out, or tell the engineer of the lighter not to do any more hoisting; that while he was there, and some 5 minutes or more before the accident occurred, the tug sank somewhat into the water, and he saw the engineer of the lighter put on steam and raise the tug higher; that he did not tell the engineer to stop until he thought the tug was high enough out of the water to permit the men to continue their work under the tug; that he then told the engineer to stop, and stood there and watched the work go He also testified that, upon reaching the lighter, he told the captain of the tug to order the men out, that it was dangerous, and that the captain of the tug replied that he thought it was all right. But inasmuch as he remained there without taking steps to stop the work, and in fact participated in raising the tug, knowing that the lighter and its equipment were insufficient for the work, and that there was an excessive strain on the point of the hook, we think that he was derelict in his duty, and cannot be said to be without the privity or knowledge essential to entitle the appellant to limit its liability.

on.

The contention of the Lighter Company that it performed its full duty to Collins as an invitee upon its premises cannot be sustained. This matter was concluded by the judgment in the state court, where the question of the company's negligence was in issue, was actually litigated, and was determined against it. But, if this were not so, we think the reasonable conclusion to be drawn from the evidence is that the company did not perform its duty in this respect.

The decree of the District Court is affirmed, with costs to the appellee in this court.

ENSLEN V. MECHANICS & METALS NAT. BANK OF CITY OF NEW

YORK.*

(Circuit Court of Appeals, Fifth Circuit. January 31, 1919.)

No. 3174.

1. BILLS AND NOTES 360-BONA FIDE PURCHASER-RENEWALS.

A bank, which in the usual course of business discounted a note made payable to the maker and indorsed by him, has the rights of an innocent purchaser for value with respect to a note taken in renewal and payable to itself.

2. BILLS AND NOTES 354-BONA FIDE PURCHASERS-PURCHASE FOR LESS THAN FACE VALUE.

The rule which protects a bona fide holder for value of commercial paper from defenses or equities that might be good as between the original parties does not require that he shall have paid face value for it. 3. BILLS AND NOTES 113-DEFENSES ESTOPPEL

A maker of a negotiable note payable to his order, who indorses and gives it to another to be discounted at a bank, which is done, and afterwards renews it by giving a new note to the bank and taking up the old, is estopped to set up, as against the renewal note, the defense of fraudulent representations by the person to whom the original note was intrusted for discount.

In Error to the District Court of the United States for the Southern Division of the Northern District of Alabama; William I. Grubb, Judge.

Action at law by the Mechanics & Metals National Bank of the City of New York against D. W. Enslen. Judgment for plaintiff, and defendant brings error. Affirmed.

Forney Johnston and W. R. C. Cocke, both of Birmingham, Ala., for plaintiff in error.

Edward H. Cabaniss, of Birmingham, Ala., for defendant in error. Before WALKER, Circuit Judge, and BEVERLY D. EVANS, District Judge.

BEVERLY D. EVANS, District Judge. In an action on a note against the maker, by the payee, the court gave a peremptory instruction to the jury to return a verdict for the plaintiff for its face value. The defendant took a writ of error.

The complaint on the note was in the short statutory form authorized by the Code of the state of Alabama. The defendant pleaded the general issue, with leave by agreement of counsel to introduce evidence as to all matters of special defense as fully and completely as if all legal defenses to the action were well and specially pleaded. On the trial the plaintiff introduced in evidence the note, which was for $34,500 principal sum, payable to plaintiff, dated February 2, 1916, due six months after date, with 6 per cent. interest from date. On the back of the note was an indorsement and guaranty of payment by A. E. Jackson. Thereupon the defendant offered evidence tending to show that the note was executed and delivered under substantially

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes *Certiorari denied 249 U. S., 39 Sup. Ct. 391, 63 L. Ed. —-.

these circumstances: The Jefferson County Savings Bank had failed, with large liabilities. Certain persons, including A. E. Jackson, undertook to form a new bank, which was to assume the liabilities of the defunct bank by taking over its assets and by providing additional funds. This new bank was called the Jefferson County Bank. Among the subscribers to the new bank was E. F. Enslen, who had been identified for many years with the defunct bank, and his wife. The plan of reorganization contemplated that the promoters of the new bank were to take a certain amount of stock, payable partly in cash and partly by note. For convenience the stock in the new bank was issued originally in the name of A. E. Jackson, but very soon thereafter the certificates of stock were issued to the individual subscribers, who had given their notes. One of these subscribers was Mrs. Enslen. She paid for the stock a certain amount of money, and executed and delivered her note for the balance to A. E. Jackson. This note included interest from date at 6 per cent., and was made payable to her own order and indorsed by her. Jackson discounted the note with the Mechanics & Metals National Bank of the City of New York at 5 per cent., and the net proceeds was credited to the Jefferson County Bank, and afterwards checked out by that bank. The rate of discount was 5 per cent., and the discounting bank accounted to the Jefferson County Bank (or possibly its organization committee) for the difference between the discount and interest rate. Just before its maturity the note was sent to the Jefferson County Bank, and was renewed by Mrs. Enslen's executing the note in suit and delivering it to A. E. Jackson, who entered thereon his indorsement and guaranty of payment and sent same to the plaintiff.

[1] Under the evidence it is clear that the note in suit is a renewal of the note of Mrs. Enslen, payable to her order and indorsed by her, and discounted to the plaintiff. The right of the plaintiff to recover is that of an indorsee.

The trial court entertained the opinion that under the evidence the plaintiff sustained the relation of a bona fide holder for value, and the defendant was cut off from showing any defense she might have to the note. The plaintiff in error insists that the evidence affords an inference that the plaintiff bank was the original holder of the original note, and that Jackson was its agent or joint adventurer in the organization of the new bank, the stock subscription to which furnished the consideration of the note. We do not think such inferences are deducible from the evidence. The evidence presented a transaction not infrequent in commercial annals. Certain persons were desirous of reorganizing a bank from the assets of one which had just failed. Additional capital was necessary, and the subscribers to stock in the new bank made and delivered their notes for their stock subscriptions. These notes were indorsed by the subscribers and discounted with a bank, and the net proceeds credited to the newly organized bank and used by it.

[2] The fact that the rate of discount was less than the interest rate, and this difference was credited to the newly organized bank or its promoters, does not deprive the discounting bank of its char

acter as an innocent purchaser for value. If this difference was paid to the newly organized bank, the stockholder got the benefit of his share of it. If paid to the organizers, who had indorsed the note, it is no hurt to the maker that the organizer who had indorsed the note may have received something for his indorsement. The rule which protects a bona fide holder for value of commercial paper against defenses or equities, that might be good as between the original parties, does not require that the holder shall have paid the face value of the paper, and where the evidence affirmatively shows that an indorsee in fact purchased it for value, in an action by him against the maker he is entitled to stand on the footing of a holder in good faith. King v. Doane, 139 U. S. 166, 11 Sup. Ct. 465, 35 L. Ed. 84.

The rulings on evidence to which exception is taken are without merit. The court confined the evidence to the transaction in issue. The excluded testimony relating to the payment of the difference between the interest rate of the note and the rate of discount would not have changed the character of the transaction.

[3] But, aside from this the defendant is estopped from attacking the consideration of the note. With knowledge of the facts relied on as a defense, she executed the renewal note in suit, and thereby waived such defenses. A maker of a negotiable note, payable to his order, who indorses it and gives it to another, to be discounted at a bank, which is done, and afterwards obtains a renewal of it, with extension of time of payment, by giving a new note and taking up the old, is estopped as against the bank to set up as against the renewed note the defense of failure of consideration on account of alleged fraudulent representations made to the maker by the person with whom she intrusted her note to be discounted, and especially so when the maker had knowledge of the facts when the renewal note was given. Hunter v. Lanius, 82 Tex. 677, 18 S. W. 201; Padgett v. Lewis, 54 Fla. 177, 45 South. 29; Riggins v. Boyd Manufacturing Co., 123 Ga. 232, 51 S. E. 434.

Judgment affirmed.

In re DAILEY.

Petition of CITY OF NEW YORK.

(Circuit Court of Appeals, Second Circuit. December 11, 1918.)

No. 41.

BANKRUPTCY 288(1)-SUMMARY ORDERS-ADVERSE CLAIMS.

A city, which under the terms of a contract for the removal of refuse, on its abandonment by the contractor, took possession of his plant to continue the work pending a new contract, is an adverse claimant, and a court of bankruptcy is without jurisdiction by a summary order to require it to surrender the property to the contractor's trustee in bankruptcy.

Petition to Revise Order of the District Court of the United States for the Southern District of New York.

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes 255 F.-34